USD/CAD refreshes 2-week lows below 1.26 post-Canada CPI

The USD/CAD pair came under a heavy selling pressure in the early NA session and fell to its lowest level since August 4. As of writing, the pair was trading at 1.2590, losing 90 pips, or 0.7%, on the day.

Data released by the Statistics Canada on Friday showed that the CPI in July remained unchanged on a monthly basis, and increased to 1.2% from 1% on a yearly basis, matching the market estimates. Following the data, the loonie gathered strength against its peers, forcing the USD/CAD pair to lose more than 50 pips.

• Canada: CPI rose 1.2% on a year-over-year basis in July, following a 1.0% gain in June

Moreover, the greenback, which struggled to build on yesterday's gains during the first half of the day amid political turmoil in the U.S., continues to weaken with the US Dollar Index now moving at 93.35, losing 0.3% on the day. University of Michigan Consumer Sentiment Index, scheduled to be released at the top of the hour, is expected to improve to 94 from 93.4. An upbeat reading could help the DXY limits its losses and close the week wşth marginal gains.

On the other hand, crude oil prices are moving higher for the second day in a row with the barrel of West Texas Intermediate now trading at $47.20, further increasing the demand for the commodity-sensitive loonie.

Technical outlook

The pair could encounter the first technical support at 1.2500 (psychological level) ahead of 1.2460 (May 3, 2016, low) and 1.2415 (Jul. 27 low). On the upside, resistances align at 1.2680 (10-DMA), 1.2755 (50-DMA) and 1.2800 (psychological level). The RSI indicator on the daily graph is moving lower towards the 30 mark, suggesting that the bearish momentum is building up.